Sebi bars Barclays from using ODIs

The Securities and Exchange Board of India (Sebi) has barred Barclays Bank PLC from issuing and trading in offshore derivative instruments (ODI) with immediate effect. ODIs are investment avenues used by overseas investors to park funds in Indian equities. “Barclays has not only failed to provide true,fair and complete details of the offshore derivatives activity undertaken by it but also prima facie violated the provisions of foreign institutional investor (FII) regulations by furnishing false and incorrect information to Sebi,” Sebi said in an order on Wednesday. “Sebi vide e-mail dated November 13,2009,advised Barclays to furnish information on all ODIs issued to counterparty UBS AG with Reliance Communications Limited as the underlying for the period beginning November 2003 up to October 2009. Further,Sebi had also sought evidential documents in support of the ODIs which were issued to UBS AG with Reliance Communications as underlying,” the Sebi order said. Barclays then stated that while reviewing the documentation with respect to those ODIs,they identified some discrepancies which were being reviewed by it. Subsequently Barclays,submitted that the counterparty of the transactions was not UBS AG as earlier reported by it but was Hythe Securities Limited ,an entirely new entity which did not form part of any of the earlier periodical submissions made by Barclays to Sebi either in its monthly reports or in the specific information submitted in response to the query with reference to Reliance Communications,the order said. “Further,Barclays was also advised to explain its stand on the wrong information in respect of the ODIs which had been issued,and was further advised to explain,why appropriate action should not be taken against it for the alleged contravention of the code of conduct specified in Regulation 7A of the FII Regulations,which prohibits an FII to make any untrue statement or suppress any material fact in any documents,reports or information furnished to the Sebi,” the Sebi order said. According to the order,in the past too,there were a few occasions which should have prompted Barclays to have a relook at their reports submitted to Sebi through their reporting platform.